Case No COMP/M SYNGENTA CP / ADVANTA. REGULATION (EC) No 139/2004 MERGER PROCEDURE. Article 6(2) NON-OPPOSITION Date: 17/08/2004

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1 EN Case No COMP/M SYNGENTA CP / ADVANTA Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(2) NON-OPPOSITION Date: 17/08/2004 Also available in the CELEX database Document No 32004M3465 Office for Official Publications of the European Communities L-2985 Luxembourg

2 COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 17-VIII-2004 SG-Greffe(2004) D/ In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus [ ]. Where possible the information omitted has been replaced by ranges of figures or a general description. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) with 6(2) DECISION To the notifying party : Dear Sir/Madam, Subject: Case No COMP/M.3465 Syngenta CP /Advanta Notification of pursuant to Article 4 of Council Regulation No 139/ On 02 July 2004, the Commission received a notification of a proposed concentration pursuant to Article 4 and following a referral pursuant to Article 4(5) of Council Regulation (EC) No 139/2004 by which the undertaking Syngenta Crop Protection AG ( Syngenta CP, Switzerland) belonging to Syngenta AG ( Syngenta, Switzerland) acquires within the meaning of Article 3(1)(b) of the Council Regulation control of the whole of the undertaking Advanta B.V. ( Advanta, Netherlands) by way of purchase of shares. 1 OJ L 24, p. 1. Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2)

3 I. THE PARTIES 2. Syngenta and its subsidiaries are a multinational group of companies operating worldwide in the agribusiness. Its focus is on crop protection and seeds. Syngenta CP is a 100% subsidiary of Syngenta. Syngenta was created by the spin off and merger of the crop protection business of Novartis AG and AstraZeneca plc and the seeds business of Novartis AG Advanta and its subsidiaries are active in breeding, production, processing, packaging and sale of various kinds of seeds worldwide. Advanta was created as a joint venture by the concentration between Zeneca Limited and Cooperatieve Suiker Unie U.A. 3 Advanta operates across 3 key regions: 1) North America, 2) Europe and 3) Australia, Asia and Africa. Advanta s European operations are managed by a European management team. The three main European crops are: 1) sugar beet seed, which is managed from Tienen (Belgium) 2) maize seed, which is managed from Kapelle (the Netherlands) and 3) seed for grasses, which are managed, alongside maize, from Kapelle (the Netherlands). II. THE OPERATION 4. The notified transaction consists in the transfer of 100% of the shares in Advanta B.V. from AstraZeneca Holdings B.V. and Koninklijke VanderHave Groep B.V. Syngenta CP and the vendors have signed a binding agreement ( SPA ) on The notifying party states that the ultimate purpose of the whole transaction is for Syngenta CP to acquire and retain the North American maize, soybean and cereals business units of Advanta, this includes a company incorporated in Europe which holds a number of IP rights (maize germplasm, a molecular marker database, know-how and probes, specific maize transformation technology and IT systems) primarily used for the North American business. The notifying party intends to immediately re-sell the rest of the Advanta business, which includes the European, Australian, Asian and African operations. III. CONCENTRATION 6. As Syngenta CP will, by the transfer of 100% of the shares in Advanta B.V., acquire sole control in Advanta, the transaction constitutes a concentration within the meaning of Article 3 (1)(b) of the Merger Regulation. IV. COMMUNITY DIMENSION 7. The concentration does not meet the thresholds set out in Articles 1(2) and 1(3) of the Merger Regulation. As stated above, the case has been referred to the Commission upon Syngenta s request under Article 4(5) of the Merger Regulation and is therefore deemed to have a Community dimension. 8. According to Article 8(3) of the EEA Agreement and Protocol 3 to that Agreement, seed products are among those that are not covered by the EEA Agreement. 2 See Case No.COMP/M.1806 Novartis/AstraZeneca, decision of 26 July See Case No. COMP/M.556 Zeneca/Vanderhave, decision of 9 April

4 Consequently, this decision does not relate to the effects of the notified transaction with regard to the markets for seed products in Norway, Iceland and Liechtenstein. However, the EEA Agreement does apply to seed treatment products. V. RELEVANT PRODUCT AND GEOGRAPHIC MARKETS 9. The transaction affects several markets for sugar beet seeds, maize seeds, sunflower seeds, oilseed rape seeds, spring barley seeds, pea seeds and onion seeds in the EU, as well as markets for seed treatment products in the EEA. Seed markets (i) Relevant product market 10. The seed industry can in general be described as a two stage industry: breeding and commercial production of seeds. The first stage comprises the breeding and biotechnology programmes leading to the development of seed varieties that are produced as "parent seeds." Breeders attempt to develop new varieties with desirable characteristics low production cost, high yield, low impurities, and resistance to disease. 11. The second stage comprises production of commercial quantities of the seed, including cleaning and processing, chemical treatment and pelleting, marketing and distribution. These activities are less specialised and can be successfully carried out on a smaller scale by producer firms under licence agreements or contracts with breeders. In some instances, parent seed is licensed by breeders to other seed companies which may reproduce the original seed or produce their own hybrids. Thus, seed production is carried out by various categories of producers such as breeders (which may be active as producers as well); stand alone producers; and, in the case of sugar beet seed, sugar refiners. 12. In previous decisions 4, the Commission has considered that the development and breeding of seed varieties and the production and sale of seeds can in general be included in one single relevant product market. The market investigation in the present case has also confirmed this. 13. Furthermore, as the various kinds of seeds are not mutually substitutable, seeds for different crops have been held to constitute separate product markets. The same conclusions apply in the present case. The transaction affects several seeds markets such as sugar beet seeds, maize seeds, sunflower seeds, oilseed rape seeds, spring barley seeds, pea seeds and onion seeds. 14. As explained below, a further sub-segmentation of certain of these crops might be possible. 15. Maize seeds: the notifying party submits that the market for maize seeds could be divided into grain and silage maize. Grain maize is mainly used for foodstuff and dominates in the south, while silage seeds is generally used as forage for cattle and is 4 See Case No. IV/M Zeneca/Vanderhave, decision of 9 April 1996, Case No. IV/M Novartis/Maïsadour, decision of 30 June 1999, and Case No. IV/M DuPont/Pioneer Hi-Bred International Commission, decision of 21 June

5 more commonly sown in the north. However, the germplasm on the basis of which the two types of seeds are bred are identical for both types. Furthermore, to a large extent, the climatic conditions allow the farmers to grow both types of maize. There are also some overlaps regarding its end use for animal feeding. Finally, most of the suppliers of maize seeds in Europe are active in both the silage and grain maize seed segments. Thus, for the purpose of this notification, a further subdivision of the maize market into grain maize and silage maize is not appropriate. 16. Oilseed rape seeds: the notifying party submits that a further sub-segmentation of oilseed rape seeds into winter oilseed rape and spring oilseed rape seeds is possible. The main difference is that winter and spring oilseed rape seeds are sown in different times of the year. The predominant oilseed rape used in Europe is winter oilseed rape, and spring oilseed rape seed is used only to a very limited extent in France, Germany, Poland and the United Kingdom. The notifying party argues that both winter and spring oilseed rape seeds are part of the same market because for both seeds the customers are identical and the crops are largely substitutable. Further, the notifying party claims that the winter type can be sown anywhere in Europe due to its favourable sowing and growing conditions. The market investigation has not provided a clear answer to a possible segmentation of the oilseed rape seed market. The final delineation of the relevant product market for oilseed rape seeds can be left open as the notified transaction would not raise serious doubts under any possible market definition. 17. Pea seeds: there are two types of pea crop: vining peas (also called garden peas) and combining peas. Vining peas are smaller and sweeter varieties containing less starch and more sugar. They are mainly sold to large food processors for commercial freezing and canning; for that reason they need to be grown and harvested at a short distance from the processing factories where they will be taken immediately after harvesting by farmers. Combining peas are harvested dry and at full maturity and are mainly used for animal feed and pet foods. The market investigation does not provide a clear response as to whether the market should be further sub-divided. However, it is indicated that suppliers tend to focus on specific segments of the market and it does not appear that all or the majority of the pea seed producers are present in both segments or are able to produce both varieties. For instance, Syngenta does not produce combining peas. From the customers perspective, the sowing and harvest conditions are different. Further, end-customers are also different and there is no indication that the final use of both varieties overlap. Thus, vining peas, where both parties to the concentration are active, can be regarded as a distinct product market for the assessment of the competitive effect of the proposed transaction. 18. Onion seeds: There are two main types of onion crop: spring onions (also called bunching onions) and common or ordinary onions. Spring onions do not form a real bulb and have a green leaf part and a blanched part. They are normally sold fresh to end consumers. Common onions have a single large bulb, and there are a number of variations in terms of size and colour. They are sold to food processors as well as to supermarkets. There are thus strong indications that spring onions constitute a separate market, but for the purpose of this decision, this question may be left open as neither Syngenta nor Advanta supply such seeds. 19. There are different varieties of common onions. Advanta and Syngenta are both active in the supply of long day and intermediate variety onion seeds. The length of day corresponds to the amount of daylight required to grow the onion variety. The 4

6 distinction is not clear cut with long day varieties requiring 15+ hours of sunlight and intermediate requiring hours of daylight. These varieties are planted in Northern Europe where there is more daylight in the spring/summer. So for example, in Belgium, the Netherlands, the UK and Sweden all or virtually all seeds sold are long day whereas in France, Austria and Germany 10-20% of seed sold are intermediate. The notifying party does not consider that the different varieties, except from spring onions, should constitute separate product markets as from and end-user perspective the onions are fully substitutable. Furthermore, in some countries given the overlapping coverage of long day and intermediate varieties there is also supplyside substitutability between them. In such countries it is therefore particularly unlikely that long day and intermediate onion seeds would constitute separate markets. 20. However, the question whether the market for onions should be further sub-divided into different varieties can be left open as the notified transaction would not raise serious doubts on any possible market definition 21. Advanta and Syngenta also supply seeds for onion sets. An onion set is a small onion bulb which is grown densely and harvested quickly as a small bulb, and then dried. The advantage to the grower in planting onion sets is timing, as onions produced from onion sets mature more quickly. 22. The notifying party submits that seeds for onion sets and onion seeds are substitutable from the perspective of the grower (the only difference is that onions produced from onion sets mature more quickly), as well as the end product (the onion) is substitutable from demand-side. There are thus strong indications that seeds for onion sets and onion seeds should be included in the same market, however, for the purpose of this decision, this question may be left open as the transaction would not raise competition concerns under any market definition. (ii) Relevant geographical market 23. In a previous decision 5, the Commission has held that there are indications that the markets for seeds are national markets. In particular, it was pointed out that prices and supply conditions to final consumers differ in various Member States, and that commercial seed is, to a substantial degree, customised (e.g., disease resistance, chemical treatments, size of seeds, etc.) to suit the conditions of each country or regional area. 24. In addition, official trials are conducted in the respective Member States to assure quality control. Before seeds can be sold, they must pass two series of tests: (i) DUS: distinctness, uniformity and stability; and (ii) VCU: value for cultivation and use. The statistical results of these trials are made available to national industry associations which will (on behalf of farmers) carry out further trials from which they produce "Recommended Lists" indicating preferred varieties based on their performance characteristics. As a result, customers normally buy seeds that are adapted to local soil and climatic conditions from producers operating in their own Member State. 5 Case No. IV/M Zeneca/Vanderhave, decision of 9 April

7 25. Nevertheless, the notifying party recognises an increasing Europeanization of the seeds business and state that that seeds markets are (at least increasingly) Communitywide, which has also been expressed in a Commission decision 6. The reason being that once the seed producer has obtained a national registration in a Member State, the new variety will be included in the European list. Inclusion in the European list allows the producer to sell the respective variety in all EU Member States. There are no indications that the relevant markets would be worldwide in scope. 26. The market investigation carried out in the present case widely agrees with the national market definition, although certain respondents also recognize a certain further Europeanization of the seeds markets. However, it can be concluded that there are still strong indicators, in particular the existence of national registration and/or national recommendation lists, that the relevant geographic market for seeds should still be viewed as national. Seed treatment market (i) Relevant product market 27. Seed treatment means the treatment ( dressing ) of seeds with specific formulations in order to protect the seeds in the early stages of their development. Seed treatment therefore targets seed or soil born diseases or soil dwelling or early season insects. The seed is dressed before it is planted. Seed treatment formulations consist of either fungicides or insecticides or a combination of both, but not of herbicides because these are agents for weed control. Although seed treatment formulations are mostly based on the same active ingredients, which are also used for the formulation of insecticides and fungicides for crop protection, they contain additional specific inerts such as additives, polymers, anti-freezing agents, dyes or pigments, in order to ensure that the dressed seeds are marked as such or the seed dressing sticks to the seeds. Seed treatment producers such as Syngenta sell their products either to seed companies such as Advanta, to wholesalers, to dealers/co-operatives or directly to large farmers. 28. In the most recent decisions, the Commission has argued that seed treatment constitutes a separate product market rather than a particular type of application of insecticides and fungicides. 7 It has also been held that the seed treatment area may be split into insecticides and fungicides, and that these two sectors may again be split by crop. The notifying party has adopted the product market definition which has been applied in previous Commission decisions. Although in the Ciba-Geigy/Sandoz decision 8 it was concluded that there were no separate markets for seed treatment, the market investigation in the present case does not support this. To the contrary, the market investigation has provided evidence, in line with more recent decisions such as Bayer/Aventis Crop Science 9, that seed treatment constitutes a separate market and that this market may be split into insecticides and fungicides and may again be split by 6 Case No. IV/M BASF/Svalöf Weibull, decision of 3 March See Case No. COMP/M AstraZeneca/Novartis, decision of 26 July 2000, Case No. COMP/M Bayer/Aventis Crop Science, decision of 17 April Case No M Ciba-Geigy/Sandoz, decision of 17 July Case No. COMP/M Bayer/Aventis Crop Science, decision of 17 April

8 crop. The investigation has confirmed that crop protection and seed treatment products target different pests, registration regulations differ and the customers and distribution channels are not identical. Therefore for the purpose of this decision the above mentioned segmentation can be applied. (ii) Relevant geographic market 29. As regards the geographic scope of the relevant markets, the Commission has in previous decisions considered markets to be national. 10 The notifying party believes that this view is incompatible with past achievements to harmonise product characteristics and registration requirements on an EEA-wide basis and to promote parallel trade between EEA states and are of the opinion that the seed treatment markets should be defined as being at least EEA-wide. 30. The market investigation has indicated to a large extent that the seed treatment markets are still national. Although, some customers and competitors are of the opinion that an EEA-wide definition of the seed treatment market could be considered, there are indicators (in particular the existence of national registration and/or national recommendation lists) that the relevant geographic market for seed treatments could be viewed as national. However, as the transaction does not lead to any serious doubts in these markets, the exact definition of the geographic market can be left open. VI. COMPETITIVE ASSESSMENT 31. The transaction will result in both horizontally and vertically affected markets. Syngenta and Advanta have overlapping business activities leading to affected markets in the following seeds businesses: sugar beet, maize, oilseed rape (and winter oilseed rape), sunflower, spring barley, peas (and vining peas) and onions. Moreover, the following seed treatment markets could be considered vertically affected: fungicides for maize, fungicides for sunflowers, insecticides for sugar beet, fungicides for vegetables, fungicides for cereals, and insecticides for cereals. (i) Horizontal impact of the transaction Sugar beet seeds 32. In the market for seeds for sugar beet, the proposed transaction would result in affected markets in 17 countries in the EU. 33. On a national level, the combined market share (in value, 2003) of the parties would be: Austria 30-40%, Belgium 50-60%, Czech Republic 20-30%, Denmark 20-30%, Finland 70-80%, France 40-50%, Hungary 30-40%, Ireland 15-20%, Italy 40-50%, Latvia 30-40%, Lithuania 15-20%, Netherlands 60-70%, Poland 20-30%, Portugal 60-70%, Slovakia 30-40%, Slovenia 15-20%, Spain 50-60%. On a European level, the parties combined market share would be 30-40%. 34. The operation would, in particular, lead to high combined market shares and significant overlaps in the following countries: 50-60% in Belgium (Syngenta [10-15]%, Advanta 40-50%), 70-80% in Finland (Syngenta [30-40]%, Advanta 40-50%), 10 See Case No COMP/M Bayer/Aventis Crop Science, decision of 17 April 2002, Case No COMP/M AstraZeneca/Novartis, decision of 26 July

9 40-50% in France (Syngenta [15-20]%, Advanta 30-40%), 60-70% in the Netherlands (Syngenta [15-20]%, Advanta 50-60%), 60-70% in Portugal (Syngenta [15-20]%, Advanta 50-60%), and 50-60% in Spain (Syngenta [20-30]%, Advanta 20-30%). In an overall EU market, the parties combined market share would be 30-40% (Syngenta [20-30]%, Advanta 15-20%). 35. In the sugar beet seeds markets in Austria, Greece, Ireland and a proportion of the market in Italy, the parties (to the extent they are active there) license their basic seeds to the local sugar industry instead of supplying commercial seeds. The sugar industry then produces the commercial seeds itself and sells them to the local farmers. The parties receive royalties for each unit sold by the sugar industry. Such royalties are in the range of 10 to 30% of the selling price. As a consequence, in the sugar beet seeds markets in Austria, Greece, Ireland, and Italy there is a relatively large discrepancy between the market share in volume and the market share in value (which is limited to only 10% to 30% of the market value corresponding to the reported volume). The notifying party is of the opinion that value market shares are more economically important than volume shares, however volume market shares cannot be disregarded when there is such a large discrepancy between the figures. 36. Thus, based on volume, the parties market share would be significantly different in Austria, Greece, Ireland and Italy. In Austria, Ireland and Italy, the position of the parties would create additional concerns since the combined market share of the parties would be 50-60% in Austria (Syngenta [40-50]%, Advanta 15-20%), 50-60% in Ireland (Syngenta [40-50]%, Advanta 10-15%) and, 50-60% in Italy (Syngenta [30-40]%, Advanta 20-30%). No overlaps would be created in Greece, since Syngenta is not active there. 37. The notifying party submits that market shares are very volatile in the market for sugar beet seeds. The reason being that recommendations are of key importance for the market performance of the sugar beet seed products, as sugar beet seeds which are not listed in recommendation lists will normally not be saleable at all. Therefore, the launch of new varieties which are included in the recommendation lists usually leads to substantial increases in market share, and recommendations lists are issued each year. On the other hand, the varieties which are replaced on the recommendation list will drop out of the market. Against this background, the notifying party claims that the current market shares only give a rough idea of the market power of a sugar beet seed producer. 38. On the one hand, certain data submitted by the notifying party show some fluctuation of market shares on a national level, since recommendations are made on a national basis (when looking at market shares based on value for the period ), in particular with regard to Portugal and Spain. However, these changes show recent considerable increases of the parties shares (for Portugal from 20-30% to 60-70%, and for Spain from 30-40% to 50-60%). The impact of a single national recommendation on the European market is limited. On the other hand, other data and information provided by the notifying party show that increases and decreases in market shares in the seeds business follow rather slow cycles and do not occur abruptly, which is related to the necessary time frame for the development, breeding, testing and commercialisation of a new variety. 39. The breeding and testing phase for new hybrids, such as sugar beet seeds, is 7-10 years, the commercial preparation phase 1-2 years, and the commercial phase around 7 8

10 years (with peak-sales for 3-4 years, followed by a declining period until phase out). In addition, the success of a newly launched variety can be foiled in its entirety by a slightly better variety of a competitor. Therefore, it is not likely that market shares would differ to such a significant degree from one year to another year as to disregard the high combined market shares of the parties. 40. In the sugar beet seeds business, there are mainly [3-5] major sugar beet seed companies active in breeding in the EU: [name(s) of competitor(s)], Advanta and Syngenta. About 10 companies market sugar beet seeds based on license agreements with the [3-5] main breeders. 41. On a European level, there are 5 major players on the sugar beet seeds market: KWS ([20-30]%), Syngenta ([20-30]%), Advanta (15-20%), Strube Dieckmann (10-15%) and Danisco ([2-5]%). [Specifies further the roles of some of these companies]. 42. On a national level (based on value), Advanta is already prior to the proposed acquisition the market leader in Belgium, Finland, Netherlands, Portugal and Spain, and this position will be strengthened following the completion of the operation. The parties combined share would be 50-60% in Belgium, 70-80% in Finland, 40-50% in France, 60-70% in the Netherlands, 60-70% in Portugal and 50-60% in Spain. The main competitor is KWS with [40-50]% in Belgium, [15-20]% in Finland, [30-40]% in France, [30-40]% in the Netherlands, [10-15]% in Portugal and [15-20]% in Spain. This means that in Finland, Netherlands, Portugal and Spain, the new combined entity would be more than double or three times the size of its closest competitor. In Belgium and France the parties would be the market leader. The remaining market shares would almost entirely be held by KWS. 43. Considering those national markets with significant differences and thus additional concerns when looking at volume figures, i.e. Austria, Ireland and Italy, Syngenta is already prior to the proposed acquisition the market leader (a position which will be further enhanced following the acquisition), with more than double the market share of its closest competitor. As stated above, the parties combined market share by volume would be 50-60% in Austria (Syngenta [40-50]%, Advanta 15-20%), 50-60% in Ireland (Syngenta [40-50]%, Advanta 10-15%) and 50-60% in Italy (Syngenta [30-40]%, Advanta 20-30%). The closest competitor is again KWS with [15-20]% in Austria, [10-15]% in Ireland and [20-30]% in Italy. 44. In addition to the high combined market shares and significant overlaps of the parties in all mentioned markets, the sugar beet market is already an highly concentrated market. The proposed operation will result in an appreciable increase of such concentration by bringing together two of the [3-5] major European sugar beet breeders, which are also the main suppliers of sugar beet seeds in Europe. 45. The investigation has indicated that [specifies this sentence] reducing the number of competitors in such an already highly concentrated market would lessen the ability of other companies to compete and thus act as competitive constraints on the new entity. 46. Moreover, the seeds industry is a research-based industry (R&D plays a crucial role in the seed industry) and competition can be described more as competition for the market than competition in the market. Companies which are active in the seeds business compete to develop a variety that will be the sole choice of the farmers. The possibility of creating a new variety is defined and limited by the source material available. This source material is called germplasm. 9

11 47. The notifying party states that access to germplasm constitutes the intrinsic value and asset of a seed developer. The sugar beet seed business is characterised by a narrow germplasm base. Apart from the [3-5] major breeders (Syngenta, Advanta, [name(s) of competitor(s)]), there are some other, mainly local breeders, with proprietary germplasm. The major breeders, such as Syngenta, Advanta, [name(s) of competitor(s)], license their products to other sugar beet seed companies which are not carrying out significant research in this area. Considering the importance of recommendation lists, R&D is of particular interest in the sugar beet seeds business (for example the notifying party submits that Syngenta spends [ ]% of its yearly turnover generated with sugar beet seeds on R&D). 48. The notifying party also submits that economies of scale play a considerable role for R&D in the seeds industry, and the market investigation has also indicated that the new entity will benefit from the economy of scale to enlarge its market position in the future. 49. Given the limited number of sugar beet suppliers and breeders (of which Syngenta and Advanta are two of the most important players) in combination with the importance of R&D in the sugar beet seeds industry, the proposed acquisition will not only create a new market leader on the European sugar beet seeds market, but will also strengthen the parties leading positions on the above mentioned national levels. Thus, it is likely to significantly impede effective competition in those markets identified in paragraphs 34 and 36 in which the operation creates significant overlaps and high combined market shares, either by creating a dominant position of the merged entity or (in the case of the Belgian and French markets) by non-coordinated effects in a highly concentrated oligopolistic market. 50. The notifying party has submitted that the market for sugar beet seeds is characterised by a narrow customer base and thus strong bargaining power vis-à-vis the sugar beet seeds producers. The main group of customers is the sugar industry, and the seed companies normally sell their commercial seeds to the sugar industry which then acts as a distributor to the growers. 51. The market investigation has confirmed that the sugar companies exercise a relatively strong bargaining power vis-à-vis the sugar producers. However, it has also been pointed out that this bargaining power may not be sufficiently strong to off-set the market power of the already highly concentrated sugar beet suppliers, and even less so following the proposed acquisition when the number of main suppliers will be reduced from [3-5] to [2-4]. It has also been stressed that with fewer sugar beet suppliers, the possible bargaining power of the sugar companies will be reduced accordingly as there will be less suppliers to negotiate with. 52. Considering all of the above, in particular the parties high combined market shares and significant overlaps, and the reduction of [3-5] to [2-4] major sugar beet producers creating a strong market leader in a R&D based industry, the proposed concentration raises serious doubts as to its compatibility with the common market since it may significantly impede effective competition in the common market or in a substantial part thereof by the creation of a dominant position of the merged entity in the market for sugar beet seeds in Finland, the Netherlands, Portugal, Spain, Austria, Ireland and Italy; and by the creation of non-coordinated effects in an oligopolistic market for sugar beet seeds in Belgium and France. 10

12 Maize seeds 53. On a European level, the notifying party submits that the maize market in Europe is characterised by the presence of a limited number of players which have about 80% of the European market. The proposed transaction will reduce this number to five and create the second biggest supplier of maize seeds in Europe with a market share of 15-20% (in value 2003). However, the most important player at the European level is Pioneer, with a market share of [30-40]%, and other competitors are Limagrain ([10-15]%), KWS ([10-15]%) and RAGT ([5-10]%). 54. On a national level, the concentration would lead to affected markets in 11 countries in the EU. The combined market share (in value 2003) of the parties would be: Belgium (30-40%), Denmark (40-50%), France (15-20%), Germany (15-20%), Greece (20-30%), Hungary (15-20%), Ireland (20-30%), the Netherlands (40-50%), Portugal (15-20%), Spain (20-30%) and United Kingdom (40-50%). The proposed transaction would in particular lead to high combined market shares and significant overlaps in Denmark with 40-50% (Syngenta [20-30]%, Advanta 20-30%), the Netherlands with 40-50% (Syngenta [10-15]%, Advanta 30-40%) and in the United Kingdom with 40-50% (Syngenta [15-20]%, Advanta 30-40%). 55. In Denmark, the acquisition will combine two of the three main players in this market, who previously enjoyed a similar market share (around 20-30%). After the proposed transaction, the parties will be around twice as big as their next competitor, KWS ([20-30]%), and the third player will be Limagrain ([15-20]%) 56. In the Netherlands, Advanta holds a particularly strong position with 30-40% of the market. Advanta s maize products are top of the Dutch recommendation list. Its combination with Syngenta ([10-15]%) will create a player around twice as big as the next competitor, Limagrain ([20-30]%), and the third competitor would be KWS ([15-20]%). 57. Finally, the concentration will combine the first and third maize seed supplier in the United Kingdom (Advanta with 30-40% and Syngenta with [15-20]% respectively), followed by KWS with [20-30]%. The merged entity will be the clear market leader with almost double the position of KWS, its closest competitor. 58. In addition, barriers to entry in these markets are high. The market for seed development and production is a research-based industry, and there is a long process before a variety of a product line is put on the market. The breeding and testing phase for maize could last between 7 and 10 years; while the commercial preparation (mainly the registration process in Member States) could last 1 to 2 additional years. The overall duration of the process and the necessity of incurring in heavy investments long before any revenue is possible (after launching a new variety) make market entry extremely difficult. This is reflected by the fact that no new entry has taken place in the past years. 59. Moreover, market shares tend to remain stable. The notifying party submits that increases and decreases in markets shares of product lines (such as maize seeds) follow rather slow cycles and do not occur abruptly. The Commission has no evidence that competitors have new varieties in the pipeline that would challenge in the short/medium term the position of the parties in the maize seed markets and the notifying party has also recognised that they do not think that conventional breeding will lead to a breakthough in the seeds business on the short-term. Moreover, demand-side is rather 11

13 fragmented as maize is normally sold via large number of small retailers to a corresponding large number of end-consumers. 60. Considering the above and in particular the parties high combined market share and significant overlaps, the proposed concentration raises serious doubts as to its compatibility with the common market since it may significantly impede effective competition in the common market or in a substantial part thereof by the creation of a dominant position of the merged entity in the market for maize seeds in Denmark, the Netherlands and the United Kingdom. Sunflower seeds 61. On a European level, the parties combined market share would be 30-40%. The parties main competitors in the market for sunflower seeds on a European-wide market are Monsanto ([20-30]%), Pau Euralis ([10-15]%), Pioneer ([5-10]%) and KWS ([2-5]%). 62. On the basis of national markets, the proposed transaction would lead to affected markets in five countries in the EU. The combined market share (in value 2003) of the parties would be: Czech Republic (30-40%), France (15-20%), Hungary (40-50%), Italy (30-40%), and Spain (50-60%). In particular, the operation would lead to high market shares in Hungary with 40-50%, (Syngenta [40-50]%, Advanta 5-10 %) and in Spain with 50-60% (Syngenta [40-50]%, Advanta 5-10%). The notifying party has also submitted that Advanta s sales and shares are estimated to increase by 5-10% in Hungary and by 15-20% in Spain in the next five years. 63. On a national level, Syngenta is currently the market leader in both Hungary and Spain, a position which will be further enhanced following completion of the proposed acquisition. In Hungary, the parties market share (40-50%) will be more than twice the share of the next largest competitor, Pioneer ([15-20]%). In Spain, the parties market share would be more than three times as high as its closest competitors, Pau Euralis ([10-15]%) and Monsanto ([5-10]%). 64. Considering the above and in particular the parties high combined market share and significant overlaps, the proposed concentration raises serious doubts as to its compatibility with the common market since it may significantly impede effective competition in the common market or in a substantial part thereof by the creation of a dominant position of the merged entity in the market for sunflower seeds in Hungary and Spain. Spring barley seeds 65. In the market for seeds for spring barley, Syngenta has a [40-50]% share (in value 2003) in the United Kingdom. However, Advanta s market share addition is not above 2%. In the UK, the main competitors are RAGT (15-20%), Monsanto ([10-15]%) and Nickerson/Limagrain ([5-10]%). Considering the small increment of market shares and the existence of several competitors, it is not likely that the proposed operation will result in any competition concerns in the United Kingdom. On a European level the parties market share is only 10-15%. 66. The barley seeds market is a royalty-based business (barley crops are predominantly self-replicating), and thus, market shares based on volume may differ significantly. Based on volume, the parties would have high combined market shares and substantial 12

14 overlaps in France with 50-60% (Syngenta [10-15]%, Advanta 40-50%). In France, the main competitors are Secobra (10-15%), Serasem (10-15%) and Nickerson/Limagrain ([5-10]%). Advanta is already prior to the operation the market leader with 40-50%, a position which will be further enhanced. Following competition of the proposed transaction, the parties will also become around three times as big as their next competitors. 67. Thus, considering the above and in particular the parties high combined market share and significant overlaps, the proposed concentration raises serious doubts as to its compatibility with the common market since it may significantly impede effective competition in the common market or in a substantial part thereof by the creation of a dominant position of the merged entity in the market for spring barley seeds in France. Pea seeds 68. On a European level the parties combined market share of the overall market for pea seeds would be 10-15% (in value 2003), and for vining pea seeds their share would be 20-30%. One of the main competitors is Seminis with a market share of [15-20]% for overall pea seeds and [30-40]% for vining pea seeds. 69. Considering an overall market for pea seeds the parties activities overlap on a national basis in Finland (10-15%), Italy (10-15%) and in the United Kingdom (30-40%). In the Netherlands, where Syngenta holds [40-50]% of the market, there is a de minimis overlap of not above 2% from Advanta. 70. When considering the market for vining pea seeds separately, the market shares increase to 20-30% in Finland (Syngenta [5-10]%, Advanta 10-15%), 10-15% in Italy (Syngenta [10-15]%, Advanta not above 2%), and 50-60% in the United Kingdom (Syngenta [20-30]%, Advanta 20-30%). In the Netherlands, the combined market share would be around 50-60%; however, the overlap is again not above 2%. Thus, the proposed transaction will only lead to high combined market shares and significant overlaps in the United Kingdom. 71. In the United Kingdom, the parties were already prior to the proposed acquisition, the first and the second most important players ([20-30]% Syngenta, 20-30% Advanta). They are followed by Van Waveren ([20-30]%) and Seminis ([15-20]%). After the implementation of the proposed transaction, the parties would not only become the clear market leader, more than twice as big as the next competitor, but the transaction would also remove the second largest supplier of vining pea seeds in the United Kingdom. 72. The parties submit that, in Europe, the main customers for vining peas are large food processing groups, which tend to develop their own lists of preferred pea varieties and buy directly from the seed producers and pass the seeds on to the growers. This would imply important buying power from the customer side. 73. However, demand side concentration appears to be somewhat of less importance in the United Kingdom compared to continental Europe. In the United Kingdom, food processing companies buy from the grower and not from the seed producers. In this manner, and contrary to continental Europe, seed producers normally have a direct selling relationship with farmers. Thus, the indirect relation between seed producers and large food processors reduces the buying power in the vining pea markets in the United Kingdom. In addition, any possible buying power will also be further reduced 13

15 as one of the main suppliers of vining pea seeds in the United Kingdom would disappear. 74. Following the above and in particular the parties high combined market share and significant overlaps, the proposed concentration raises serious doubts as to its compatibility with the common market since it may significantly impede effective competition in the common market or in a substantial part thereof by the creation of a dominant position of the merged entity in the market for vining pea seeds in the United Kingdom. Oilseed rape seeds 75. On a European level, the parties would have a combined market share of 10-15% in the market for oilseed rape seeds, and 10-15% if winter oilseed rape seed is considered as a separate market. Norddeutsche Pflanzenzucht ( NPZ ) and Monsanto are the most important players in the breeding of seeds for oilseed rape. NPZ has on a European level an estimated market share of [20-30]%, followed by Monsanto with [15-20]%, Limagrain with [2-5]%, and Pau Euralis with [2-5]% for oilseed rape seeds. In the market for winter oilseed rape seeds, the market share of NPZ would be [20-30]%, [15-20]% for Monsanto, [5-10]% for Limagrain and [2-5]% for Pau Euralis. 76. The parties activities in the market for oilseed rape overlap only in Germany and the United Kingdom, with a market share (in value 2003) of 15-20% in both countries. If the segment of winter oilseed rape is considered separately, the parties combined market shares would be 15-20% in Germany and 20-30% in the United Kingdom. In these two markets, the parties face competition from other important players, such as NPZ (with a market share of around [60-70]% in Germany for both possible product markets) and Monsanto (with a [15-20]% in the United Kingdom for oilseed rape and [15-20]% for winter oilseed rape). Syngenta is not active in the spring oilseed rape seeds business in the EU. 77. In the light of the above considerations, the proposed transaction will not raise serious doubts as to its compatibility with the common market or in a substantial part thereof in either the market for oilseed rape seeds or for winter oilseed rape in Germany or in the United Kingdom. Onion seeds 78. On the basis of an overall market for onion seeds, the parties combined market share on a European level (in value 2003) is 5-10%. The new entity would face competition from important players such as Bejo ([20-30]%) and Seminis ([5-10]%). 79. Both parties are active in six Member States: Belgium, France, Germany, the Netherlands, Sweden and the United Kingdom. The only significant overlaps are in Germany (15-20%), Netherlands (15-20%), Sweden (15-20%) and in the United Kingdom (20-30%). Based on volume, the parties market share in Germany would reach to 30-40%. In all these markets, the parties would still face strong competition from important European players such as Bejo with markets shares (in value) of [30-40]% in Germany, [70-80]% in the Netherlands, [40-50]% in Sweden and [30-40]% in the United Kingdom. Other competitors are Nickerson ([20-30]% in the United Kingdom) or Takii ([15-20]% in Germany). 14

16 80. Both Syngenta and Advanta are active in long day an intermediate varieties. The parties activities would result in affected markets with regard to long day onion seeds in Belgium, Germany, Sweden and in the United Kingdom, and for intermediate onion seeds in Germany. In Belgium, the Netherlands, the United Kingdom and Sweden all or virtually all seeds sold are long day, whereas in Germany around 80% is long day and 20% intermediate. 81. For long day onion seeds, the combined market shares (in value 2003) of the parties would be 10-15% in Belgium, 15-20% in Germany, 20-30% in Sweden and 20-30% in the United Kingdom. By volume (2003) the market shares would be similar or only slightly higher in Belgium (15-20%), Sweden (20-30%) and in the United Kingdom (20-30%), and in Germany the parties combined share would increase to 40-50%. For intermediate onion seeds, the parties activities would only result in affected markets in Germany (10-15% by value and 30-40% by volume). However, as explained above, it is particularly unlikely that long day onion seeds and intermediate onions seeds would constitute separate markets in Germany, as growers in Germany have a choice to either use long days or intermediate onion seeds due to weather conditions. Thus, it is not likely that the proposed operation will result in any competition concerns in any of the mentioned markets. 82. The overall market share data for onion seeds provided by the notifying party does not include spring onions. Since neither of the parties supply seeds for spring onions, the market shares of the parties would be even lower if spring onions were included in the data, and thus no competition concerns would arise. 83. In addition to onion seeds, Syngenta and Advanta both supply seeds for onions sets and the overall market shares for onion seeds provided by the notifying party includes seeds for onion sets. The segment of seeds for onion sets is small and of minor importance compared to the overall onion seeds market. In addition, if seeds for onion sets were viewed separately, the parties combined market share would be 30-40% (Syngenta [20-30]%, Advanta not above 2%) on a European level, and the only affected market would be the Netherlands. In the Netherlands, the parties combined market share would be 40-50% (Syngenta [40-50]%, Advanta not above 2%). Since the increment would only be minor, no competition concerns would arise. 84. In the light of the above considerations, the proposed transaction will not raise serious doubts as to its compatibility with the common market or in a substantial part thereof with regard to any possible market for onions mentioned above. (ii) Vertical impact of the transaction 85. Syngenta is a producer of seed treatment (in addition to seeds) and sells its products to either seed companies such as Advanta, to wholesalers, to dealers/co-operatives or directly to larger farmers. 86. Vertically affected markets exist where Syngenta is a supplier of seed treatment destined to treat a certain seed crop, and Advanta is a supplier of the seed crop concerned, and either Syngenta has a market share of 25% or more in the seed treatment market and the geographic market concerned, or Advanta has either alone or together with Syngenta a market share of 25% or more in the seed market and the geographic market concerned. 15

17 87. The transaction will lead to a number of vertically affected markets. However, the transaction would not raise serious doubts in these seed treatment markets.there is no indication from the investigation of any foreclosure effect in these markets. Although, Syngenta has substantial market shares in certain national markets for seed treatment fungicides, the combined market shares of the parties in the relevant downstream seed category markets are rather low or moderate. In addition, other important competitors are active in these markets and customers are able to find alternatives to Syngenta s seed treatment products. 88. The following markets would thus be considered to be vertically affected: 89. (i) Seed treatment fungicides for maize in Austria, Belgium, Germany, Greece, Hungary, Netherlands, Spain; Syngenta has a market share (in value 2003) of [30-40]% in Austria, [50-60]% in Belgium, [80-90]% in Germany, [70-80]% in Greece, [30-40]% in Hungary, [10-15]% in the Netherlands and [90-100]% in Spain. On EEA level, the market share of Syngenta is [30-40]%. Despite the high market share in Germany, Greece and Spain, the combined market share of Syngenta and Advanta in the downstream corresponding seed category market is not higher than 20-30%. 90. (ii) Seed treatment fungicides for sunflowers in France, Hungary, Spain; Syngenta has a market share (in value 2003) of [90-100]% in France, [80-90]% in Hungary and [50-60]% in Spain. At EEA level, Syngenta has a market share of [80-90]%. Despite the high market share in France, the combined share of the parties in the downstream corresponding seed category market is only 15-20% in France. In Hungary the combined market share of the parties in the downstream corresponding seed category market is 40-50%. 91. (iii) Seed treatment insecticides for sugar beet in Finland, Poland; Syngenta has a market share (in value 2003) of [40-50]% in Finland and [2-5]% in Poland. In the downstream corresponding seed category market the combined market share of the parties is 70-80% in Finland and 20-30% in Poland. On EEA level, the market share of Syngenta is only [not above 2]%. 92. (iv) Seed treatment fungicides for vegetables (vining peas) in the United Kingdom, Netherlands. Syngenta has a market share (in value 2003) of [50-60]% in the Netherlands and [60-70]% in the United Kingdom, where the parties have a combined market share of 50-60%. At EEA level, Syngenta has a market share of [40-50]%. In the downstream corresponding seed category market the combined market share of the parties is 50-60% in the Netherlands and 50-60% in the United Kingdom. 93. (v) Seed treatment fungicides for cereals in Austria, Belgium, Denmark, France, Germany, Netherlands, and in the United Kingdom; Syngenta has a market share (in value 2003) of [30-40]% in Austria, [20-30]% in Belgium, [30-40]% in Denmark, [30-40]% in France, [20-30]% in Germany, [90-100]% in the Netherlands and [5-10]% in the United Kingdom. On EEA level, Syngenta has a market share of [20-30]%. Despite the high market share in the Netherlands, the combined market share of the parties in the downstream seed category market is only 5-10%. 94. (vi) Seed treatment insecticides for cereals in France, and in the United Kingdom: Syngenta has a market share (in value 2003) of [30-40]% in France and [20-30]% in the United Kingdom. On EEA level, Syngenta has a market share of [20-30]%. 16